updated 11:40 pm EDT, Mon May 4, 2009
FTC looks at AAPL and GOOG
The Federal Trade Commission has initiated an investigation surrounding ties between board members at Apple and Google, according to the New York Times. Google CEO Eric Schmidt and former Genentech CEO Arthur Levinson hold positions as simultaneous board members of both companies. Unnamed sources familiar with the matter claim Apple and Google have been notified by the commission that an antitrust inquiry has begun.
Although board positions are commonly held by executives from separate corporations, antitrust laws prohibit individuals from serving on the boards of two competing companies if it could lead to consolidated control and anticompetitive practices.
A provision under Section 8 of the Clayton Antitrust Act, regarding "interlocking directorates," is said to be rarely enforced, although the two companies have begun to transition into competing markets. Apple and Google previously dabbled in separate segments of the tech industry, but the iPhone and Android operating system have begun to blur the distinction.
The G1 is viewed as a direct competitor to the iPhone, while variations of the Android OS are also utilized on netbook computers. Aside from computer operating systems and smartphones, Google's Chrome browser offers a potential rival to Safari. With the recent talk of premium content on YouTube, Google could also be entering a market that is currently dominated by iTunes.
"Government actions under Section 8 are rare, but they are brought under circumstances when the presence of a common director on competing boards is likely to be anticompetitive," said Andrew I. Gavil, a professor at the Howard University School of Law.
Schmidt is said to decline participation in Apple's board discussions while the subject surrounds mobile phones. The actions might not be sufficient to avoid intervention from regulators, although most situations result in voluntary resignation to avoid potentially lengthy legal battles.
Despite Google's relationship with the Obama administration, some experts doubt the interaction will influence any investigations. "I expect the administration to be aggressive, generally, on antitrust enforcement," Sanford Litvack, a partner at Hogan & Hartson, told the Times. "I don't expect Google to either be singled out or to receive a free pass because of Schmidt's relationship with the administration."